they have been hieen lower all years. >> and did it go up? >> 50%. yes. >> the hard part is the cumulative effect. we are muddling along, but there is a cumulative effect. >> and mark and diane, thank you so much. have a great weekend, and right now it is time for "squawk on the street." breaking news on jobs and good morning. i'm carl quintanilla with melissa lee live and cramer and faber are off this morning. poised to rally on a better than expected july number up 163, and look at the futures a monster rally here and we will see if it holds. as for europe in the green for most of the morning after a big drop of the spanish short-term debt and more on that later on. >> look at the gains across europe and the road map no surprise starts with the simple question, how do you spell relief? the jobs numbers adding 163,000, the most since february and the

rescissi revisions at a minimum. we will talk to the knight-mare continues at knight capital. we will discuss that. >> and we will talk to the ceo exclusively at 1040 a.m. from li linkedin. good friday morning. some people may be relieved with this number, but the rate did not change much and some people are saying it is not good enough. but the first take? >> well, it is important to remember that the economists were basically saying that in the winter the job growth was too strong and in the spring, too weak, and the average as mark zandi said in last hour somewhere around 150,000 so we are returning to more normalized but disappointing job growth. >> the fact that there were no major revisions, okay, and the earnings okay.

the internals good or bad? >> well, the household survey looked particularly weak and looked like the number of unemployed people ticked up. if you take it up a decimal, it is roughly unchanged. it is not a good unemployment report necessarily, but it is sort of -- well, it is what you get when you have low expectations. people looking for almost nothing and when you get a little better than almost nothing, people are happy. >> all right. up to speed on the number overall. businesses added 163 as melissa said earlier on much more expected and the most since february. private sector employables up, and the july ticked up to 8.3 or 8.54 or something like that as the households shows a decrease of people in the household with job, and dan, what does it mean for the fed? moving the needle backwards or forward? >> well, i know we will have joel on in a moment, and i would

like the hear both sides. the unemployment was weak, and the jobs survey showed more jobs than the household survey. >> how does this make you feel that in july a change of consumer sentiment behavior when it comes the buying and spending and maybe that could translate to the next jobs report. >> the interesting thing about the next jobs report is that it comes before the next fed meeting and if there is a statist cal payback so to speak, july other than january has the largest what we call the largest seasonal adjustment factor and we look for the decline of 1.3 million jobs in july on average. so there could be some element of statistical payback right in front of the next fed meeting, but of course, we will have to wait and see. >> a lot of discussion about the model over all. >> yes, of course. >> and whether it makes q 1 look better than expected and q2 more. >> yes, it is looking that way with each passing report. >> and when you look at consumer

confidence the regionals are pretty bad. and congratulations to adp for getting this almost exactly right. does this change your view on a slowdown? you have been, i would say n negative on the macropicture? >> yes, i if i had to pick sides it would be negative. but the e kconomy is growing barely and no jobs of meaningful piece and the confidence at recessionary levels, and if things at any month or quarter are slight ly better and it doe not change the larger story, this stinks. no other way to explain it in the economy growing at 1% to 1.2% is terrible and the corporate profits slowing down and when you go through the individual company reports in the earnbing season, enormous amount of uncertainty and not just europe, but the united states and brazil and china and it is not a particularly good environment and maybe better or worse than i expected in any given quarter, but overall, it is not very good. >> this stinks. >> but the rate of stink -- >> that is the headline.

>> the rate of stink? the ros. >> yes, the ros on this thing, and this is what this month shows us but will we come out on other side in the august and the september jobs report and see a different picture? was this a one-off in your view and give us the context? >> well, the 160,000 is not what we have seen, but it is still not very good at all. does the forecast see a pickup on a sustainable basis to the 200 to 250 basis in no. and even if the report was better and the next report is better, later in the year, you will run into an enormous amount of unsecertainty with the fisca cliff and the bush tax rates. >> and that could clear up quickly but not saying it is. >> and unicorns could fly, and not the dismiss the point, but let's not forget that there are several leading democrats that are open ly and publicly encouraging the president to lead us off of the so-called cliff to allow it to expire and tie the tax, what would be tax

increases to the republicans intransients let's say with respect to the top 1% or 2% and whether it is a winning strategy, it won't say, but be clear that is a position advocated by some in the party. >> all right. let's bring in the chief u.s. economist for deutsche bank and cnbc contributor and good to see you this morning. >> good to see you, carl, this morning. >> well, you are a great example of how tough it is to get it month to month, because it is a crap shoot, bottom line and you tu turned a little bit negative in the past few weeks and here is a number that for the first time in months surprises. your reaction? >> look, there is a real seasonal pattern in the last few years that dan would agree with me on the unemployment and one more month of weakness and then the recovery. it is happening one month sooner which is good. we think that the second half gdp is better and the economy is mending and the recession risk that we heard of a few weeks ago, carl, that should be taken off of the table and in the margin it makes it less likely that the fed does anything next

month which is good. >> just because we have one good number, joe, you think that the recession should be taken off of the table? i mean, this is enough? this is enough to really remove that from the discussion? >> melissa, if you look at the jobless claims which are more important than the payroll numb numbers in the sense that companies are so lean, and we are back almost at the entry year low on claims. we had some very good chain store results yesterday. this is one number, i think, in a pattern of numbers in the past few weeks that are turning up. i think that what the ecb has suggested it will do is constructive for the risk assets and if europe can stabilize over the next month or so, we are starting to remove some of the hurdles and again, remember, you have to remember, melissa, it is in the backdrop of much more deleveraging now than we had a year ago and households in better shape. while dan is right, this is not a good economy, and it does not mean that it is not going to be better at some point, and the building blocks of better growth

are starting to become more present by the day. >> joe, it is dan. taking this out one step further toward fed policy and the economists are making a lot out of the usef of the closely monitored phrase in the recent fom statement, and the addition towards the end of the statement, and do you read into that, this is a fed on edge so to speak and ready to go even on an intermediate basis? >> no, i like john hillson a lot, but i don't like this. they are closer to going, but they won't government the fact that they didn't do anything with respect to the rate language guidance this week tells you that they don't want to do anything. if they could skate by and hope that the ecb does something between now and the september meeting they'd love to take a pass. >> joe, still, explain, because you have done a little bit of a reset on the overall macro view in the past few weeks, right? >> no, carl. we have been more cautious on employment and saying, looking

you cannot trust the numbers, but the economy is going to improve in the second half and the growth in the high 2s and this is a temporary soft patch. some of which is statistical. >> when you mention corporate profit, i mean, it is hard to find a quarter where top line growth has been this bad r relative to the expectations, and do you think though that there is room in the coffer for companies to add more workers going into the second half? >> for sure, carl. you are looking at the s&p profits and if you look at the nipa profits, they might decline this quarter, but you won't get a recession three or four years out and we have a long way to go in the economic cycle. one thing that people are not talking about is housing. i mean, potential stimulus that could come from the housing even if the labor market continues to hold in at 150 a month is huge. all of the household price data that we look at are turning up. that is to me, no pun intended very constructive longer term.

>> and joe, with respect to the margin argument, i agree with the the regression analysis two to three years down the road, but if the margins regress because the top line slows, isn't that necessarily a warning sign here if you are not seeing a commensurate pick up in demand, and isn't that going to weigh in the forecast earnings going forward? >> well, it might dan, but here is the issue, we are starting with the low multiple and multiple expansion and we haven't had it, and the irony is going to be as estimates of profit growth slow, investors at the same time become more confident in the believability of growth over the next few years and you assign a multiple of 15 or 16%, and that is where the equities will go up even though the margins are not looking as good. >> all right. joe, the debate will continue here for a little bit. thank you. >> thanks, guys. happy to be on again. >> and do you see anything in the market to underpinnings of

expansion of 215? >> no. i think that one thing shows that joe is great, but one reason that we are more quote, unquote right than wrong is that the multiple is set to expand from 12 to 13 or 15 to 16 or something that we have been pushing against for years and that is the defining feature of the bulls and the bears. if you are bullish staying at 15 or 16. >> and the underpinning argument is that it has to return to historical levels and anything out there that makes you believe that we have to return to historical levels when it comes to valuation? >> well, the multiples are seen through the prism of interest rates and low inflation or high inflation, you have low multiples and then you move away and get a bell curvian way in terms of the multiples. they are also a sign of confidence. as long as you are characterized by uncertain economic forecast and god knows what is going on in washington, no reason for the multiple to expand and investors to feel more confident in the

earnbings of that dollar, and for them to expand. >> and let's talk about capital and the story in the last couple of days continues in the news this morning with the trading glitch that resulted in a loss. we have the latest, kayla, and it is almost safe to say that next week we might not see knight the way it exists currently? >> well, melissa, my sources say that knight will make it to the weekend, but it is whether it will make it through the weekend is the big question here. there is certainly a lot of interest in potentially doing a deal, and you can see the stock rising pre-market on that news saying that the traders are saying that knight is safe above the key $2 level unless potential bidders drop out. they are racing to get a top seller to find a partner in a short period of time. regulators are camped out at the knight head quarters to ensure that the key capital levels are sound. as long as that is the case,

knight will likely field a lot of interest when it is that regulatory capital falls below the key levels that buyers get cold feet. sources say that the bulge bracket banks are interested because they could get a marquee facing and electronic platform at a steep discount after knight lost 80% of the market value after disclosing the glitch. and my sources say that citadel investment group was canvassing a invester on a knight deal as late as last night. they could be looking for a big equity stake in knight, but since it is twice knight's current market cap, any deal would see the firm sur rerender control and a situation that will play out in the next 24 to 48 hours and we will be monitoring it closely. >> kayla, i am curious what your sources are saying how co comfortable the potential bidders are in buying a company when the total liabilities may not be fully understood yet? well, that is interesting question, because you think of

the crosshairs of the regulatory environment, and that is for the j.p. m jpmorgans and the goldman sachs and given everything facing the banks in the last few months and the regulatory scrutiny, would they be comfortable with the perception of buying a company with a gaping loss like that. knight took on all of the losses and they are eat iing the liability themselves, because they are saying that you know we are, it is not a situation with nasdaq or facebook where they said, we are obl legally requirr -- only legally required to pay for $100 million, but all of it. so you hope that is contained when they open up the books to find out quickly if that is the case or not. but they have private equity and boutique banks who are definitely interested and in the process right now. >> and trying to wring fencing going on around the globe for the various reasons. thank you, kayla. dan, obviously, btg is a

competitor of knight's, and what have you heard of ameritrade is stepping away from the knight capital and are you seeing tin crease in volumes at this point? >> well, i want to be careful in the situation obviously, but any time you see a market dislocation of this variety, it would not be surprising to see potential customers looking elsewhere, and btg is no exception, and we are seeing a increase in business and among many who have seen it, but it is natural. we are a natural competitor and large institution and traded around 27 billion shares last year and it is natural that people would look our way, and always we stand ready to provide support to the customers and whomever. >> and knowing where you stand from that point, when you have bats and facebook and knight in the course of three months, does the market sustain those blows? we are not that far off of the

52-week high on the indexes? >> well, sure. with respect to btig, we don't engage in the electronic trading that knight does and other institutions do, so in theory we are not susceptible to the same type of malfunction, but with respect to the market more generally, yes. volume is volume. lit find a place to and if noit knight or bats or jpmorgan or goldman sachs it will find a place to go. >> and people keep talking about mark cuban and remember when he was on and said he did not trust the market because it is a bunch of computers. >> and a casino. >> but there is no bug-free software in the world really. >> and i would say there is no bug-free person in the world. humans have made errors for years and computers make errors and in the case, it is a software designer, although i don't want to speculate or weigh-in, but don't pretend that

humans can't make mistakes or compu computers can not make misa takes and for us, as part of the platform, agency-focused we have seen a pick up in the business and it is, again, it is a shame. >> and obviously, you want to be sensitive. the post is right next to us, and we know a lot of the guys, and obviously, we are thinking of the company as we are trying to report on them. we will talk to linkedin as well, and talk about the quarter. and after the break, the first reaction from the white house on this morning's numbers and talk live with the labor secretary hilda solis. the unemployment going to the upside. more "squawk on the street" right after the break. more? then don't get nickle and dimed by high cost investments and annoying account fees. at e-trade, our free easy-to-use online tools and experienced retirement specialists can help you build a personalized plan. and with our no annual fee iras and a wide range of low cost investments,

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>> a look at the futures this morning reacting nicely to the jobs numbers which were and upside surprise. it does not take away the pain though because we have had down days every week and the dow was on the track for the worst week in nine. >> yes, we were down for the last four trading sessions 1.5% for the last four sessions this week. >> and as we mentioned the july job jobs number 163 nonpharma. and now we are combing through the answers and the search of

the win e, but the prize is good. an official cnbc backpack of the olympics autographed by the crew. >> and you brought this back because you came back yesterday, right? i am going the sign it right now. >> yeah, why not. >> greenhouse is not going to sign it though, right? >> thoroughly unfair. >> we will announce -- >> the value of the backpack would plummet. >> last month we had someone hit the number on the head if i'm not mistaken. >> yes, and you did as well although we both got it compl e completely wrong this morning. >> did you have a guess, stan? h. >> we were at 115. >> well, that is better than most. i did not see -- >> well, still wrong. >> and 150s or 160s plus. >> well, 135 or 145 is as high as you get. >> well, a true surprise here on the street. and coming up, some words of wisdom ahead of the bell. let's look at the futures, because we are setting up for a strong rally to finish off this week the first friday of the

month of august and looking at up day, 156 on the dow. stay tuned. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused.

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>> well, it is above stall speed, but not by much, so you have to keep an eye on them. we have had trouble with the seasonal adjustments and as one of the earlier guests said, we may have gotten out from under that shadow maybe a month early, but not enough to write home the mother about yet. >> and does it correspond to what we are hearing from corporate america yet? we have heard from so many companies that things are slowing down in june and that would jive with the report that the next job report might be bumpier? >> well, as i said, i think it is a better number and we are still working through the seasonal adjustments. i'm as you may recall a proponent that when lehman went under, it tended to distort a lot of numbers, and we are working our way through that. so, for now, i don't think it is anything that the white house can feel comfortable with yet. we have got more numbers coming up, and it fits right in with bernanke's plan to see if i can hold back until september, and

not influence the election, but the economy. >> and let me jump in real quick with respect to the white house comme comment, and from the political standpoint, the number of jobs added in a given month is definitively secondary to the unemployment rate. the rate is what makes the front page so to speak. >> for better or worse. >> and for better or worse and even though it was basically unchanged in month, it will be reported as going up 0.1. >> yes, from america, that is the number and they don't know the difference of the non-farm rates. >> and so that is the same. >> and we are not far from where we were a little while ago. >> this is 42 consecutive months above 8.0 which is a stunning figure. art, we will talk to you later. welcome back. >> thanks. meanwhile, fasten the seat belts and the trading time is about to happen, and we will talk to labor secretary hilda solis, on the triple digit moves on the past five friday, and we

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on in a week where there were a lot of concerns about trading, about central banks, nice to have a jobs number that does have a surprise to the upside. annow yum brands ringing the opening bell and we will talk to the ceo david novak named ceo of the year. and on the other side housing works fighting aids and homelessness. so we will look at good breadth there and keep an eye on the kcg. >> yes, knight capital is up by about, jumping all over the place, and 20% we will call it at this point, and in the $3 level. and kayla had reported before that it was exploring a lot of alternatives and the question is whether or not it would secure it through the weekend, and here we have breaking news, knight tell telling the brokers this morninging that the firm had obtained a line of credit and that would do it according to the "wall street journal," so knight has secured finance wig is accounting for the big pop.

this is heavy volume and we have seen the extremely heavy volume with knight and a couple of days ago it traded on record volume and 165 million shares that traded hands in the late session, and early today, we have half of that on thek boos already as we see the shares up 25%. big spike there on the "wall street journal" report once again that it has secureded a line of financing. >> yes, that is one of the major storylines of the day. and also some earnings to talk about which we have not gotten to yet. procter & gamble and beats by a nickel but the rev 2345enues ar light, and the margins are less. the street was at 103 and no word of big ackman or any activist efforts to speak of. >> and that was a huge push to up theside for procter & gamble and they did take down the guidance in june. we have heard fritit from a num of companies that they come out

and then beat the guidance. >> the game played for years that the companies steer the analysts in one direction and the hurdle rate is 70 to 73%, a and this season it is 68%. the top line is much more difficult cogame so to speak and that is where we are having trouble. this quarter we are expected to have trouble and next quarter and then the fourth quarter, some resurgence. >> i can't remember the exact stat, but the last time the beep or the miss on revenue was above 50% where less than half of the companies were beating on revenue. >> well, you have to go back and don't quote me on this although i'm on tv, the dot-com era for anybody missing to such a degree. >> manyyears. >> we have not talked about the surge of oil prices. it is up by 2.3%, and real strength in energy and the financials are strong and technology is strong and tabing a look at the big cap tech

stocks and cisco is higher and ibm up by 1.5% which is helping the dow here and we have other earnings as well to talk about. linkedin for one and we will be spe speaking to the ceo exclueleyly in the 10:00 a.m. hour. and they have better than expected earnings and 89% jump in revenue and raised the guidance for the full year, and this is a story that we heard from yelp where we have the bright spots in social media that seem to be the counter point to the likes of a fisbook. -- facebook. >> yes, they are calling it the facebook antidote. and there are pockets of strength even as facebook has gotten awfully close to 20 this week. >> and the trade is down with the jobs report and seeing the pullback in the u.s. treasuries and the german bonds and the euro and the u.s. bonds are gaining a full percentage almost. and goldman saying put in a stop

loss at 118, but right now at 22,193. >> if you look back the euro has been locked in the down trend since it was north of the 1.50, so if you look tat thor chart ad i don't know if we have it, but there is a creeling to the the trade if the trend of the last three to five years is to hold and you switch that. >> goldman's argument is that ecb, and the stance is maybe not the timing that you like and the stance is out there, and the interest rate differential is unlikely at this stage to work against you, and that is the tactical trade. funny to put it on the same week where draghi says that the currency is irreversible which is a funny comment. >> and the currency may be irreversible, but it does not mean it is worth less. >> yes, let's pick in with bob pisani on the floor. good morning, bob. >> knight is up big here 23%. but i have spent the last 24 hours calling the guys who write some of the high speed programs and talking to people involved in the business saying, what do

you have to say about this? what do you think needs to be done here because everybody agreed that something happened that nobody wanted to see happen. a lot of people are coalescing around the idea that we need a broader systems risk officer and it is a fn si term and a lot of bureaucra bureaucracy, but it is a great idea. most firms have chief financial risks and they monitor the credit risks and reputational risks, but maybe it is time for the financial firms to have a systems financial risk officer who monitors the systems. it is simple what they will do, monitor it and shut it down when the risks rise. now how do you define how the risks hike, and most of the guy i talked to who write these systems say it is easy to do. could you adapt a uniform systems risk management system is, and they say, well, if you have 1,000 orders that go

through the system in a second and then suddenly 20,000 orders that go through the system in one second, that is weird. the system will shut down automatically, but most systems don't have that. do the uniform risk standards need to be applied to the big financial firms and of course, independent of the systems that shut down down here at the new york stock exchange of the circuit breakers that we have. should we develop something like that? well, that is an interesting way to move forward this whole conversation and when you have this whole system and the officers, they report to the chief compliance officers and the chief risk officers. one thing you need to do is to recognize the limits of testing. everybody has said to me, you can have the testing all you want and you can simulate trading, but you can't simulate it perfectly and no way to make it perfect. let me move on and say something. you see how much we are up here and the trader said that the nonfarm payrolls are lore than expected and the market did not slowdown because it lessens the

chances of qe3 and the industrials and the financials are all up today on a slightly better nonfarm payroll report. in terms of the earnings winding down but did you see agrium, and the midwest drought is huge for the fertilizer companies and boosting the numbers here and looking good from the agriums near a high. guys, back to you. >> all right, bob. thank you so much, bob pisani and the jobs number is mixed for the month of july. 163 and better than expected, but the unemployment rate did, it is tough to call it that but from 8.2 to 8.3 if you round up. i want the first reaction from the white house and first on cnbc hilda solis joining us this morning. and madam secretary, good to talk to you. how are you? >> well. thank you. >> and a lot of people are relieved of the number, and can you walk us through the internals that at least the labor is finding the most interesting? >> well, i continueb to see some

good signs in the manufacturing area, and business and professions and also it seems that in the area of leisure spending in terms of food services and tourism, those are good signs that people are spending some money there, but i think that we still have a long way to go. and we still lost jobs in the local government, and we know that there's an ability for us to move ahead if we can get cooperation from the congress, and right now a propes al to pu 1 million people back to work in construction and teachers and firefighters and get it together. so the president is going to be talking about that and continuing to push forward on tax cuts for the middle-class. i think that those are things that will help us reenergize and move ahead and hopefully bring down that unemployment number. >> i was wondering how long it would take to mention congress as a potential salve for the e kcon conmy and it did not take you long. walk us through the model that

the notion of somehow the modeling or the statistics keeping makes the first quarter look worse than it is, and makes the second quarter better or second quarter look worse than it is. is that holding true? >> well, you know, what i like to look at is where we have come from. because, you know, think about it, when the president took office, we were losing so many jobs, and 800,000 jobs on the average in a month. on a monthly basis and now we are actually somewhat ahead of the curve where we are adding more jobs in. yes, we would like to see it a lot higher, and yes, there are some things that are not in our control, and headwinds from europe and what have you, and also the stalemate in congress. i mean, that is why it is so important for us to stay focused and get some of the projects that the president has put out on the table, so that we can get together and make sure that our economy and we get people back to work. that is the bottom line. sgl and you know, madam secretary, carl mentioned your mention of congress which is something that you have been pretty steady on in terms of the need for congress to act, and at

the same time in middle america, across the country, people are looking at the unemployment rate ticking slightly higher to 8.3%, and that is the headline they will read torl, and at the same time they don't have much faith in congress to get the act together so to speak to accomplish something. what do you tell them if you say essentially that congress is the number one catalyst for sustained job creation? >> well, what i would say is that there are also some other things that are happening here. the president has made, as you know, good investments in manufacturing and as result in the years since 1989, we have seen strong returns and the auto industry showing us flickers of hope it is continuing, and the major investments have paid off and the american public is starting to realize where that is happening. with e continue to see growth in the health care and industry, and business and professions. and with the congress taking action on transportation bill that also is going to add

confidence, but we need to do more. we still have projects that we know can be moved on if the congress will come together. i think that the public needs to just have their voices heard and make it loud and clear to congress that now is the time to act. we still have a few more months here left in the year. >> and madam secretary, if i could ask you a question about the unemployment rate for teens and minorities, which are considerably higher than it is for the nation as a whole, would youl say that the president's policies have been successful at addressing this aspect of the economy? for instance the unemployment rate for teens is north of 23% and the unploemployment for bla teenagers is closing in on 23%, and is there something that the president should or should not be doing to address the needs and would you say he has been successful so far? >> well, i would say that the president has done quite a bit so far. in the department of labor we have a number of programs or made key investments in job training and making sure that

the youth especially in this period of summer youth employment where we know that we didn't get any money from the congress and we went out through the president's leadership to initiate and get the private industry to open up job slots and we have been able to do that for the last two year. yes, we need to do more, but i can tell you that there has been a great improvement in term s o the unemployment rate dropping against latinos and after can americans if you look back to the last two years, but it is slow and coming and we can concede in the jobs report that latinos are faring better. they are finding the jobs and that is the best thing. the best thing i can tell you is that we want people attached to the labor force which means g g going into the one-stops and getting assistance for the job coaching and writing resumes and getting into trainings that will impact their likelihood of finding a job. >> and madam secretary, one final quick question, does you or the administration have a view on whether extended unemployment benefits contributes to increasing the

unemployment rate? >> i would say to you that every time we make available assistance for for unemployment what we are encouraged is that people are coming in and asked to talk to ur ostaour staff at o one-stop centers and assess what the skill level is and make sure they get into appropriate job training or coaching that they need and that is what is going to help us. they have to stay attached to the job market. that is the best thing i can tell you, and we know that for every dollar that is spent in ui, $2 is regenerated back into the community, and it also helps to serve as a stimulus in local economies. >> and finally before we let you go, i wondered what the reaction was when we first saw the weaker numbers in the summer and you said silence and fist pumps at l labor when you saw this one? >> well, i know that we have to do more. there's still many, many people looking for work. while i know that the president

is using everything that he can to bring to bear everything to improve the situation, we still need help from congress, and we still have to have more b businesses to open up the opportunities for the people to be employed. we have a ways to go, and i feel good about the number, but we need to do better, and we are not going to stop. we will work every single day until everyone who wants a job finds a job. >> madam secretary, thank you very much and enjoy the weekend. thanks for coming on. >> thank you. thanks a lot. all right. the reak shction from the bond ? rick santelli is in the cme in chicago with that. >> well, quickly, the madam secretary brought up a couple of points i want the weigh in on. one, when she talks about the private industry with regard to jobs, of course, we have the think about the private sector when we talk about jobs, because they are the job creators that we must bring back to the game. but talking about them in the same way that the fed assume that when you create the excess reserves they go into the

private sector. the private sector does what they want to do. second thing, state and local and teachers and firefighters and we all acknowledge that these are important jobs. but they are not under the president's venue. think san bernardino, and the states and the cities and the local parts of government, they need to get the fiscal house in order and in doing it involves only being able to pay for what you can afford. the federal government looking at that is a, oh, hey, the jobs are down and effecting the numbers, but of course they are! now, let's look at the market and a 24-hour juggernaut tenure, and we close at 148 and now to 153 and up five. not a great number, put a number smidge better than expected. and we see that we closed last week basically at the same area. looking at a boon chart, looking at the easy safe harbor and redistributing it a little bit, but they are down a little bit on the week. if you look at the spanish yields, wow, moved over 30 basis

points lower, but also not much change on the week. i think that taking a weekly perspective will give you a longer and more accurate view. back to you. >> all right. thank you, rick. when we come back we will talk to the yum brands chairman and ceo david novak who rang the opening bell a few moments ago. don't go away. questions? anyone have occasional constipation, diarrhea, gas, bloating? yeah. one phillips' colon health probiotic cap each day helps defend against these digestive issues with three strains of good bacteria. approved! [ phillips' lady ] live the regular life. phillips'. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity.

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here's a look at the markets when the dow is up 172 and the nasdaq and the s&p have erased the losses officially for the week. first time in a while that the dow and the s&p had been down together. >> yes, absolutely. all right. let's go the sharon epperson at the nymex. sharon. >> well, we are looking at the oil prices accelerating the gains and strong rally here in the energy market with crude oil prices and the wti contract up $3 and topping $90 a barrel, and near the highs of the session for brent as well sh, and that near $108 a barrel. a couple to factors that the traders are talking about the flash number, and the increase in jobs of 160,000 and that more

important to them than the unemployment rate, and also looking at the strength of the euro and saying that is another f factor that is helping the rally along and then reinterpreting mario draghi's comments from yesterday and saying that with the ecb president and the belief they have in ecb president about the plan to perhaps purchase more italian and spanish debt and finding a way out of the debt crisis is what they are hanging the hopes on going into the weekend and that is fueling the rally traders say here in the oil market. gold prices are faltering a little bit from the highs that they saw just under the $1,600 mark. back to you. >> thank you, sharon epperson. shares of yum brands up to 13% year to date and how is the company navigating rising cost in a fickle consumer market. fresh off of the ringing of the opening bell to be named the 2012 chief executive of the year by ""money" magazine. congratulations.

>> thank you, melissa. >> what do you see on the ground and the number one barrier to increasing the hiring from the view of the corporate? >> well, it is a slow conmy and when there is not a lot of growth, that causes a lot of hesitation, and it holds people back. so you are to really have growth on your side before you see the turn around. >> and is growth what you are seeing on the ground at yum and what going on in china one of your biggest markets. >> well, it is challenging in the united states, but for us, we we are having a great year, and we have great value and best innovation going in. and taco bell launched a catino bell line, and we have a nacho cheese taco which is a big hit, and kentucky fried chicken is launching es pepecially prepare bites and doing fantastically well, and pizza hut with the pizzol, and other items that are

outstanding value in a economy like this that you have to have. >> and one thing in the quarter is china and the softening off of the tough comps, but you don't believe it is going to last for long, and any more clarity on that in a couple of weeks later? h. >> well, the challenge is strong and the business model is outstanding and this year we are going to set a record in china, and of these 700 million in openings the sales are solid and we are overlapping phenomenal numbers right now, but the business model we have is great, and we see it continuing to be great for years to come. >> where is the softness to the degree there is softness? >> well, we are looking at the same-store sales to be up in the middle digits and we are running double digits-plus, and that is very strong growth on top of phenomenal growth last year, and so we feel very good about our china business. one of the most exciting things about china and i know that melissa you have been there and looked at kfc and pizza hut is taking off in china.

and pizza hut casual dining and we will end the year with 800 pizza huts along with the 3800 kfcs so those two brands now are just really doing well. >> we have to ask you about the commodity costs and corn prices have only gone higher and no abatement there which is going to push the protein prices higher as well, and how are you hedged out on that? >> well, i think that we manage our commodities as well as we can. we don't think about that. i mean, we obviously think about it, but the thing that we are focused most on is how do we satisfy the customers and bring forward innovation, and you nknw the commodities go up and down all of the time, and we have to stay focused on the customer and making sure we bring a good proposition to the party, and that is what we are doing day in and day out. >> and the commodities going up and down but you don't see corn going up everyday in a month. >> and we deal with it in a number of ways and deal with it when it actually affects the prices. and we have mixed margin

management and how we can have the pricing tiered, but when the costs go up, the companies have to figure out how to cover them, and that put pressure on any business no question. but the bottom line is that you have to keep the bottom line value, and be smart about it and keep the margins where they r and it is challenging and not easy, but as a company, you figure out how to do it. you manage the costs and stay all over it and innovate. right now sh, the economy is ve slow in the united states, and we have major innovation, and innovation solves for a lot of problem problems. >> all right. david, thank you very much. appreciate. >> and i appreciate it very much. >> yum, david novak. much more "squawk on the street" ahead.

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♪ steve liesman looking at the ism report that is just crossing and looking for top line number that i will get in a second. guys if you have it in the back, give it to me. 52.6 is the number that we were looking for 52 and a touch better than expected off of the june 52.1. we look at the subcomponents and good numbers on the business active and 57.2, and the new orders up and employment down

49.3 versus 53.3 in the prior month which is interesting and we will talk about the jobs number in a second, and that is the opposite way of supply and deliveries down and inventories up and not a good sign there, and a mixed report and looking at one other thing here. exports we are up a touch and inventory sentiment was also down. so a mixed report, but at the end of the day, a touch better than expected. i think that this adds to, you know, the concept that the economy is chugging along no great shakes, but very much the story this morning with the jobs report. you know what the numbers were 163,000 on the top line and better than expected, but looking at the details, you will see why people are kind of underwhelmeded with the number when you look at where the job growth was, especially sort of for example education and health being up what was the number there, 148,000 on services and manufacturing up 25,000 and the reason we are noting that is that it might have benefitted from the seasonal adjustments

and temporary help was up around 14,000, and we will look at the reaction that we got from the economists and jeremy suggest ing that the decline in the household and unemployment are the discouraging numbers. and bmo saying that the jobless rate picked up, but not tremendously, and it is made bias to ease and bark clay's saying a similar pace of growth in august would be sufficient for the fed to hold off on a further round for balance sheet expansion in september, and finally goldman, it is not a game changer in the view of the economy or the fed. we continue to expect some easing at this expansion after the meeting and we believe it will result in an extension of rate guidance to mid 2015 ra than qe3 and what did bernanke say is the key? well, the unem moment raploymen which has been ticking up ever so slightly and i don't mean to

push the can down the road as we complain about the european central bank, but it makes the august jobs report that much more consequential, and along with the other data of the federal reser ave whave and wha would do. carl? >> yes. i want to get rick santelli's reaction as well. >> well, the camera are somewhere else, butly pop into the shot in a second. this is always an important number and sorry, public i spaced through it. 52.6 is not really too bad in the context of some of what we have been seeing. but it is as steve pointed out at this point, i would have liked to have seen a 56 or even a 48, and why? because i would have had a better handle of the direction. this is kind of middling as was the employment data and i think that it continues to put the burden of proof more on the actual performance of some of the future numbers with regard to nonmanufacturing, and this does it in any mind define anything. and if you look at the way that the markets are responding,

10-year notes are hovering at one month and high yields if they close at 1555. >> rick, thank you so much. rick santelli in chicago. road map for the next hour of "squawk on the street." we will start with the rally centered around the jobs number today, 163 on nonfarm and that is the most since february while the unemployment rate ticks up barely if you round up to 8.3, a and we will talk about the internal effect on the markets and we will talk to the chief internal e kconomist yon hatziu >> and a exclusive interview with linkedin ceo. >> and the question remains what are the reg yu ulators doing to ensure that the investors stay invested and we will get the attorney's take in a few moments. >> firstb back to the jobs rally and the better than the street expect and the ism numbers for julie and we are sitting at the

session highs and it is the dow erasing the gains of the session and the nasdaq erasing the losses that we have seen for the week. we will get to the numbers and what it means for qe3 andian hatzius is a chief economist at goldman sachs. thanks for coming in. what do you expect in qe3. >> well, slight easing and possible in the september meeting, but my guess there and what is consistent with the numbers today is a small step and extension of the forward guidance. >> you have been saying this for a while now, and we keep waiting for them to move, and has any of that weighed on you that perhaps you are expecting more on them than you are willing to give? >> well, we are expecting additional easing and we have gotten it and the extended operational twist and increased

the size by a decent amount. we think that there will be additional balance sheet action eventually, but the more logical time for doing that rather than doing it in september is probably at a time when the prior balance sheet expires. so they have been easing and i think they will continue to ease and i think it is going to be a step by step process rather than a, you know, very proactive process, and i think that is, you know, continues to be the story. >> does the presidential election get in the way, and is that a block to the actually embarking on that action, because there is an argument that of course, they could be perceived as attempting to deduce the stock market going into the election. is that on the radar? >> well, it is on the radar prior to the election, and it is probably increases the hurdle just a little bit for how much you need to see in order to expand the balance sheet before the, before the election and i don't think that it is a major issue, you know, first and

foremost what they are going to look at is what they think that the cost and the benefits are for the economy. but, you know, at the margin, of course, they are aware of the political arena. >> and we interviewed the k k i tear of labor a few moments ago and she said that the top catalyst for job creation would be some sort of action by congress. historically, give us the context to that? is it true that congress could do something, and wave a magic wand and we could see more sustained job creation? >> well, i did not see the interview, but my guess is that she did not say wave the magic wand. >> no, my interpretation. >> but fiscal policy matters and the difference of having the fiscal cliff hit in full and the full extension of all of the provisions that are currently on the books, you know, bush tax cuts and the payroll tax cut and all of the other things is that it is significant, and so there is no question around that. i doubt that fiscal policy going

to be a really big net stimulative factor any time soon, but it does matter. >> for those who look at the number versus the, you call them soggy numbers in the past few months, and how much of the auto shutdowns or the degree they weren't as bad as some thought, is this a indication? >> well, most of the 25,000 increase in manufacturing was due to the auto sector, and so, you know, that takes away a little bit of the shine, and i u think that the fact that a lot of the improvement also occurred in noncyclical sectors like leisure and hospitality is a slig slightly less positive aspect, and then i think that the household servey was not good. it is a slightly better report than what we have had over the past few months but not a game changer. >> and some point to ism and maybe below 50. >> and most likely below 50 in the ism and the rest of the ism

was more encouraging so overall i'd say that the numbers have continued to be soggy and no long er getting the kind of downside surprises that we had a few months ago and that is at the margin encouraging and growth is going if be a touch strong er stronger in the second half than in the second quarter, but it is still soggy. >> and we know that things are bad and we can, you know, construct an argument na says that maybe it is like japan and the stock market will have it, and we know all that, and that is the basis for which i ask the question, and on of the advantage advantages of getting older and very few of them but it is that you can believe in cycles and already people are making money, because they believed in the cycle in housing and that is particularly true in certain areas of manhattan but if i have faith in cycles and this is going to come back, then there must be a point relatively soon that i position for that if i am trying to forecast where we will be in the year or 18 months time. and one of the things that you can't muddle for and you would agree is dramatic changes in the behavior or dramatic changes in optimism. just talk me through whether what i have said is at all

relevant to people watching now, and if you believe in cycles, maybe now is the time to buy. >> i think that, you know, i think that cycles are important and cycles are the bread and the birth of the business economists, so, you know, clearly i think that cycles are important. >> and this market is not believing in cycles at all and continuing to trough. >> well, the question is basically which way are the surprises coming in. are the surprises on the positive side or on the negative side? i think that over the next few months, you know, maybe it is going to be a little bit more neutral at least relative to the negative surprises we have had, but a real, and the sort of acceleration that would give you, you know, a complete change in the mindset that unfoch n unfortunately i don't believe. >> and we should remember that the central banks are flat out the liquidity is virtually full-on, and surely if there was a change, this thing could take off like a rocket? >> well, i don't think that it is that easy if when you are up

against the zero bond or the nominal short term interest rates and lot of constraints on what you can do with the balance sheet, and the fed can't go out to buy corporate bonds or buy equities are do things that would probably have a bigger effect on the financial conditions, and there are things that can do and run a policy and i don't believe that the stimulative impulse is that large that you would really get that big of an acceleration. >> well, i think that is an important point, simon and the question is now that we have seen the markets up 10% on the year, and have we anticipated an upturn on the cycle when it comes to the stock market investor? >> would it be if the cycle was turning and talking about major improvements in the employment picture and the interest rates would be. >> well, 3.5 or 4.0% growth you would get a much higher valuation of cyclical costs and much higher interest rates of course. but that, i think, it is not my expectation.

>> it is not the expectation. >> no, not my expectation. >> thank you,ian hatzuis. thank you. >> and guys i want you to take a look at the shares of open table and a triple digit day on the dow and we are seeing a 16% move in this stock. reported earnings of 42 ent cents a share and that was five cents above estimates and revenue topping expectations and of course, the guidance boost that we saw and they are saying that they are seeing more diner using the service and increased the guidance and big move for the stock today. melissa, back to you. >> thank you, jacqui deangelis. >> we have erased all of the losses of the week, and we are in positive territory for the week in all three major indices, and we should note that general electric is three cents away from a new 52-week high. and we have at lot of stocks posting strong performances and financials up 2%, and energy stocks buoyed by the rise in wti in today's session.

>> and linkedin shares are rising after last night's estimates. we will talk to guy running linkedin jeff weiner, who knows how to monetize. we will talk to him in a moment. those olympians can take home gold, silver and bronze medals, but what about you? what do you get? absolutely nothing. but if you nailed the number on july's employment report, guess what, you will be taking home the official olympic backpack and signed by the "squawk on the street" gang. are you this week's lucky winner? find out later on "squawk on the street." [ male announcer ] it's a golden opportunity...

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45 minutes into the trade and we have a strong rally and dow is up 217 points and relatively broad based and we will bring in warren myers vice president of floor operations here at dme securities and warren, what is going on here? >> well, a couple of things and upward movement here out of europe and the europe movement got strong and that led to a nice base for the opening here and the nonfarm payroll numbers on the upper side than what people were expecting that pushed it forward. >> and let's be clear, a complete reversal of what draghi

said yesterday, because yesterday a lot of overly n negative nonsense and today a broad-based rally and the short te term yields are coming down and people are realizing something is happening. >> well, people are realizing that draghi believes he can do but the timing is not going to happen today or tomorrow, and that is why you have seen the fluctuati fluctuation, and now people realize there is a reality behind it. >> is this a bottom in the market? come on. >> i don't think so. >> why? >> i think that there's too much overhang. just in this country alone and the fiscal cliff coming up and the elections and it is very difficult to call a bottom right here. >> and oa three-month fascinatig channel, and the market wants to front run the policy. >> and it is looking like it cannot go higher here and i think that there is too much uncertainty around the world right now and not only here, but in europe as well. difficult to make the call right now. >> and goldman is out today saying to go long euro to 130

and stop at 118 and would you do that at least? >> well, i will tell you -- i love that. >> it is a tough one. >> yes. >> and it is a real tough call. i mean, the trade has been short euro and short euro and short euro and if it turns around, the euro could pop and no doubt about it. >> and you think that europe will bottom then? >> well, again, if you get some real action out of draghi and everyone else over there. >> and it is coming because he has written it on the wall. what more can the man do? >> well, put it in way, here in the united states what the fed has done over the last 2 1/2 and three years and are we out of the mess? >> well, he is coming in massively to support the bond markets and he could do and get the result, because he has unlimited funds which is different from trying to move a dog by wagging the tail which is what the fed is doing. >> well, it depends upon the dog. >> i like that simile, because no dog would fall over. >> and macro, econ wise, t

jobs itself does not move you the numbers? >> not significantly at all. there is a lot of one-time numbers in there and a lot of nonpermanent jobs in there, and so i mean, we will have to see a consistent month after month quarter after quarter increase, i think for everyone to feel comfortable that we are on the path. >> and i have a retail question, am mom and pop question, and i asked earlier, i have been through bats and we had the flash crash and the bats, facebook and knight this week, and are -- does sentiment get worn down gradually or -- are we after all of these things, do you expect that there are not that many mom and pops left to begin with? >> well, every one of the instances it takes more and more confidence out of the equity marketplace and it is not the new york stock exchange per se, but the structure of the equities market that is the real problem and that is really what needs to be addressed. >> really? you think that really people at home care about that if they

think that the stock market is up 20%, they will buy the market? >> well, they you have a couple of things working against the equities market in general, and that is one that the correlation between here and the euro and all of that is so significant that you can play the macro play much easier and cheaper by trading the etfs and other products so in that regard we have lost a lot of business, but in the structure flaws, i believe, there are structural flaws in the equities markets that allow the flash crashes and instances to happen that need to be resolved. >> hey, is it is the weekend after one hell of a week, warren. thank you. >> my pleasure. thank you. >> and after the knight capital trading debacle are forcing changes in the regulator system, and what are the reg yu ulators doing to make sure company investors are protected? we will get a look at that next. you do what you do... because it matters.

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you can see that knight capital is holding onto the 25% gain and we want to keep you up

to date on the story. the "wall street journal" is reporting that knight has obtained a line of credit to allow it to operate for the day. knight capital executives have been calling around trading firms to ask them to reroute traffic through knight but as far as we can tell, we have been calling around and as of the etrades are going away from knight, and vanguard is still trading them away from knight, but the 25% gain on the notion that it can operate for at least the day at least. >> and knight capital fighting for survival of course, and the next guest says that a firm could be swept up in this similar situation, and that regulations are needed to keep the market under control. we are joined by stewart to talk about this this morning. talk to me about where you think that we are and whether a new wave of regulation will fix this problem. >> well, there is more regulation that needs to come into play here. this has been, as you know, a series of problems from facebook

and the flash crash and as we move ahead with the technology unless the regulators push firms such as knight to update the technology, have backups, have backup systems just like the aerospace industry does, like na nasa, so that when there is trouble, and trouble should be expected, there is a backup system that can take the place and fill in. and they should be testing over and over again just like the aerospace industry, and if that is not done, then this is going to happen over and over again and the confidence in the markets by individual investors will evaporate and the economy will be impacted no doubt. >> and you mentioned industries like aerospace, and like aviation, and like manufacturing, and where there are multiple redundancies and yet there are errors and things do go wrong and what is the regulator's response to manage those? >> well, we have the faa and we

have the -- they do oversee the redundancies and we have the just the use of analogy in the aerospace industry, you have the boeing and the other manufactures would like to cut costs and not have those backups necessarily, but they have the regulators that make sure they do. so you need the same thing in the industry, and you need some push by the regulators that not everything is cutting costs, and you have to have backups and otherwise, investors will get hurt here. it is not just, you know, those shareholders of knight. it is much broader than that. >> and stewart, i know we are in the early innings of the knight trading glitch, but at the same time as far as you can see it, could there be other claims or lawsuits in the future based on what happened? >> well, i think there's going to be a number of indirect

lawsuits. it will be a great impact indirectly. there are many investors that were inves vested in the hundreds of stocks impacted by this that suddenly dropped in value or were impacted substantially. and those investors that were over concentrated in those positions could have gotten, if they were margin, sold out, and suff suffered significant losses. if they were improperly overconcentrated, so this is something that 1 is going to sp a number of lawsuits and not just knight caple the or just arbitrations in relation to this. >> yes, one of us is into living in reality and i'm not sure which one of us is it. the reg eye lay tyeye -- regula not stop mf global or stop pei y perigrin financial, and how do you believe that the regulator is going to get into the machine

code of knight capital and determine whether or not it is risky? i mean, this is beyond the ability of regulators, and this is just not going top happen. >> well, the regulators have to be resourceful and not just talking about those who are experts in securities for example which is what the prime focus is. >> and the machine code, stuart, with respect, because it was a computing error and how does the regulator get down to the granular level? >> well, that is why they need i.t. experts to go in there and check the backup systems and if we don't, this is going to happen time and time again. there should be, i'm not going to say that it won't happen again, but it shouldn't happen as often as it has been happening. the facebook ipo and the flash crash and it has been happening too much, and there's too much of an impact on the broad economy. it is -- it's something that has to be dealt with and unfortunately without the regulators oftentimes the

industry cuts costs and will not do it. >> stuart, good to talk to you and that is a fascinating and tough story to watch. stuart meissner joining us from new york. >> and now reporting the second quarter earnings, falling 44% as the high inputs and shares soared last night after the company offered a upbeat view in blue nile. and next we will talk with harvey cantor about diamonds and how hard retail has to shift coming up after this. to watch it for us. stranges thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? if your bank takes more money than a stranger, you need an ally. ally bank.

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little more than an hour into trading and some of the stories with resquawking about, 10:32 on east coast and 8:32 on the west coast. highs are in levels we have not seen in a decade. and stocks missing out solar, and motorola and abercrombie and fitch. and the service industry, the nonmanufacturing number rising by half a point to 52.6. forecast called for a reading of 52.0. >> okay. the u.s. stocks are rally on the

back of a july jobs report. let's bring in david kelly, the chief global strategist with jpmorgan global funds. >> glad to be here h. >> you are calling it like it is. this jobs report is not good news for american workers, but good news for the investors, because there is low wage growth and low interest rates will protect the margins. >> yep. i think that the 163,000 gain in payroll jobs does reoverstate the strength in the labor market. things are just, this is an economy if it were a plane it would be taxiing forward slowly and not taking off, but in is slow-growth environment, wage growth is very slow. you have slow growth in wages and forecast and that is why the margins are sustained here. we still think that the quarter will see, or that this quarter season the earning season will be the strongest we have seen and the margins are sustained here and that is pretty good news for the the investors. >> where is that going to take the stock market in your view? >> well, the stock market should

gradually move up, because what has happened over the last few years as interest rates on cash have gone the nothing and the bond markets have had this extraordinary rally, we have a huge divergence, and we are priced for a huge recession, and if you look at the relative pricing of stocks and bonds that is not what is on the cards and because of that money will flow from the cash accounts and bond accounts into the equity market and that should push equities higher. >> and david, within the defensive sectors and we haddian hatzius on, and he said if the economy was showing momentum you would see movement in the defense markets, and is that still the story in your view? >> well, the dividend paying stocks are alternative to fixed income investing and think of this not so much from the in terms of the economy as investors, because the investors are scared of equities, but moving into reits and utilities as bond substitutes, because they cannot get the yield into

the bond market and moving into the high yield paying sectors, but it says more about the investors loobing for the yield in a less volatile sector than it says anything else. the investors do not buy into the idea that the economy is going to do better, but they can't stay in the low-yielding bonds. >> and maybe true, david, but at the same time the dividend-paying stocks have been leaders when it comes to the price appreciation so far this year, and you look at the at&t and high dividend yields, but also a strong depreciation for the years, so it is a cycle that feeds upon it and what blaekss breaks that and gets people to move away from the stocks? >> well, i don't want to break away entirely, but a it is better than fixed income, but it is an't coy n'continuum and peog from bonds the high yield and utilities to reits and as they are more expensive son a relative valuation reason, there are cheap stocks in the middle. companies with low dividend payouts and high cash flow, and money will eventually move

there. so it is just that it takes a little bit of time and time for people to build a little bit of confidence in the stock market overall. >> okay. >> all right. david, good to see you and have a great weekend. >> you, too. david kelly there from jpmorgan funds. and now blue nile beat the street though profit was down a year early. the stocks were trading higher than usual. and we should note that the short interest on the stock is high and 33% of the shares outstanding, and harvey cantor is the ceo of blue nile, and exclusive cnbc interview, and harvey, great to have you with us. >> thank you, melissa, it is great to be here and talk about the second quarter results today. >> yes, the margins were crimped aly little bit, and the higher medal and diamond costs hurt the margins and what are you seeing coming into the rest of the year and next year when it comes to the commodity costs? >> well, the margins are in line

with what we made in the beginning of the year. we made two investments to highly i price diamonds and greater return to customers which is a better share for the market and longer term value for the customer and the customer file which has happened well in the second quarter. >> yes, the diamond business of course the cornerstone of your u.s. engagement sales and in the past you have had to cut prices because you saw a slowdown in the market, a nd in the most recent quarter you reported a 19% increase in sales. what are you seeing there? can you give us a color as to how the consumers are spending and are they impacted at all in terms of the choices they are making in terms of buying engagement rings? >> well, what is great is that the core business at the under $25,000 and the extraordinary business over $25,000 are both working really well. so that the engagement business across all price points is working and it continues the bode well for what we expect, cautiously, i might add, but cautiously expect good results for the second half of the year.

we are excited to the have the consumer recognize the value we bringing to, ma and to your point with the change of the year over year diamond prices we are continuing to demonstrate great results. >> harvey, be honest with the situation this you found yourself in. you were parachuted in marchf and the share performance has been terrible over the past year and couple of years and then you decided and you come from sportswear and outdoors gear and clothing and you are taking the whole business down market, and that is probably not how you would position it, but certainly with the lower price points, and can you talk to, a, about the difficulty of doing that within an organization and taking the aspiration in the market lower in how you are driving people forward? >> well, actually we are trying to do what we have tried to do in the history of blue nile which is to compete not only just price, but the value and the education and the counsel and the guidance of the male consumer and her as well. around what it is really allowing to us do is to bring to

market pricing that is superior across the traditional jewelry industry. inasmuch as we really believe that long term, that is the right thing to do, we have made investments since february to do that and we do believe that the value will be continuing the resonate with the customer. we really feel strongly about what we have accomplished so far, and that has created the q2 results. >> a lot of the discussion about online companies involve social, and customer acquisition and how expensive it is, and how costly it is to get them on the social, and would you argue that, that hill is more or less steep over time? >> well, actually, the social media practices have been really successful so far, and if you have noticed things like pinterest or polyboard, and pinterest specifically, we are ranked number 11 if you look at the total pinterest followers and pinnings, and we are getting good traction of the social media and it demonstrates what the consumers are trying to do engaging with the brand and no pun intended really, but that social media we have continued

to believe will be an increasingly part of the marketing campaign to try to emotionally connect with her. >> interesting. you know, pinterest is of whelming female, and aren't most of the engagement rings bought by men? >> well, the reality is that one-third of women actually have a heavy hand in actually picking the ring. >> really? >> one-third of them heavily influence the male, and quite honestly, there is a one-third of the traditional perspective where he literally goes to ask the father for someone's hand in marriage and marries. >> it is like, this is what i want and you will get me. >> the use of the word heavy. >> and send web links, right? all right. harvey a pleasure to speak to you and hope to see you again. hope to see you again from blue nile. >> okay. flashback from jackie. >> well, we are looking at shares of health net, hnt, and reporting the second quarter earnings better than expected after selling one of the business units but slashing the

full year guidance and that is problem there saying that the higher health care costs are hurting the core health care business and that is weighing on the shares and up today, but this is down more than 23%. carl? >> and thank you, jacqui. before we go to break, we want to look at crude. unbelievable day and took us forever to get below $90 and now back above $90 and this is a biggest gain in a month and obviously on escalating violence in syria and following the rise in the euro and the equities today, and hard to separate it, but it is a chart. coming up jeff weiner talks about earnings and everything linkedin after the break. and sometimes, we trip ourselves up, but that's okay. at liberty mutual insurance we can "untrip" you as you go through your life with personalized policies and discounts when you need them most.

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linked in shares are up 100, and now after the bell, our john ford is joining was a cnbc exclusive the ceo of linkedin

jeff weiner. >> good morning, carl. good to see you. >> jeff, great quarter and strong guidance raised for the year. i want to start off talking about mobile though, because those were some of the numbers that jumped out at me between the apps and the mobile web, mobile is 27% of the visiting members burkburk -- but how can apps be used in linkedin. >> well, it is used via mobile devices substantial year over year and we are up 10% from this time from a year ago, and to get to the majority is some time but we expect the number to grow. >> something that you said on the call last night, i believe was that there is some inventory constraint as far as advertising. the space that you have particularly for the people to

directly place their ads on linkedin and how much of that is related to mobile because you are testing the tablet-linked apps and that is growing so far, but the ad inventory spots are not there, so would you have a lot more inventory if you had the placements on mobile as well? >> well, certainly incremental inventory, and no question about that. we continue to test via the phone. in terms of the tablet, we recently announced a pilot program that has been very well received by the blue chip marketers such as shell, and we are seeing a positive response to that, so we will continue to test various implementations of the phone. as for the web-based inventory, and we are not seeing the cannibalization, and if anything, the mobile inventory and engagement is turning out to be neutral to the creedette based on the fact that we are c

connecting with more people. >> back to the studios, because you have questions, too. >> yes, john. i have a question for jeff. i want to talk to you, jeff, about what you are seeing in the business versus what we are s seeing in the economy. in the economy a tepid jobs environment but at is the aim time your hiring solution segment was up 10% and you added 1,600 new corporate customers which is versus the high end on the street which is estimate of 1,425 and why the disconnect between your biz answer and the how many customers are going to you versus what we are seeing on the ground? >> well, there's at least two reasons for that. one is that we are very global business at this point. 62% of the members are coming from overseas and some of the growth that you are seeing is happening outside of the united states. asia-pacific is the fastest growing region in terms of revenue growth year over year, but in terms of the actual dynamic, what we have seen dating back to q4 of 2008 when we started to hit the macroeconomic headwinds is the fact that people increasingly turned to linkededin when the economy is difficult and not just professionals looking to

leverage the work, but it is also companies looking to maximize on those recruiting within the budgets. >> h and you want to term it social media or however you want to term it, you can monetize seeing the companies paying as much as $2,800 a seat effectively within your organization within the software and they could buy 100 seats. that must be very attractive to everybody else to the other competitors around you. who is the closest to your tails if you like. who is catching up? who do you fear most? >> well, retrying to play our own game, and on the global basis by virtue of the scale we are now up to 175 million members on the global basis and we are unique in the exclusive focus of the professional context. >> there is no one else in that sphere? >> well, you have some local players in germany and france for example, but in terms of

true geographic scale linkedin is unique in that regard. >> jeff a lot of of the linkedin bears would say that facebook came into the business and turned a key essentially and they could get in on it, and to what degree is that true? what barriers do you have to ensure that the business is going to -- >> we are having audio difficulty here. did you hear that, jeff? >> it sounds like a verizon commercial. since we could not hear it, i will throw it in. we have a sales navigator that allows for the business development and sales professionals to kind of use linkedin in order to access leads so up to this point, largely, linkedin has been something that hr has really keyed in on. how confident are you, and i know it is early days for the sales navigator, but how confident are you that is going to turn into a sig nnificant business for you? >> you are right, it is early days and really the initial investment in that part of the business, but we are confident

that there is a lot of opportunity and upside there. we have had a lot of success with regard to transforming the recruiting industry through the hiring solutions business and the flagship recruiter think w something similar with regard to sales by enabling people to leverage their networks, sales professionals, business development professionals and convert what would have been a cold call into a prospect which could lead to a a far more effective sales process. >> thanks for spending the time. guys, back to you. >> john fort and jeff wiener, ceo of linkedin, thanks so much. still to come, you may have heard of him, olympic gold medalist, ryan lochte. will join us on "squawk on the street," we'll get his take on what it was like to swim his last race against michael phelps.

markets continuing to rally this morning in the wake of today's better-than-expected jobs number. we want to bring in art hogan, managing director at lazard capital. trying to reconcile things economists are saying about the jobs number, i.e., not a game-changer, still pretty soggy, internals not that great.

with 212 on the dow, what gives? >> i think if you take the jobs number in a vacuum here, if you look at the average we were running the first quarter, the payroll numbers were about 225,000 jobs created on a monthly basis, that's down to about 175,000 jobs a month in the second quarter. so this number gets us back to a more normal range, and unfortunately, the month of july has the most seasonality in it meaning the adjustments for seasonal factors in july are the largest. so i think a lot of people will discount the numbers until next month. the auto sector had a big blip in it because a lot of factories were shut down. in general, the piece of data we're probably missing is the ism nonmanufacturing number. but i think the trade we're seeing is much like we saw at the end of last week, that armageddon short trade seems to be taken off the table. whether it's stocks or macro, because we're getting messages from central bankers that we're

going to see better monetary policy soon. >> do you think -- obviously you would think a a stronger number pushes the fed more toward the back burner, i.e. equity negative, it doesn't seem to have held up today. >> i think the line in the sand would have been much higher than a 163 print. you'd have to have something with a 2 handle on it, 200 something, to change the discussion about the fed and qe 3 and what they do in september. so my guess is it wasn't strong enough. i think a lot of people are factoring in the seasonal factors. >> how about the notion that even though europe not stepping up to the plate right now, they have at least draghi has set a framework as to how he might do it in the future and the markets think okay, i'll take that? >> i think our cash incentive best, when he said optimistic revisionism. i think we have high expectations coming into the ccb meeting. those expectations were set last week by mario draghi last week. he showed up with nothing, but he is laying out a framework.

what we have to take note of is this is a significant change in the tone of the ecb. meaning they're willing to work to get closer to the qe 3. they're leaning in the direction of qe, not s&ps, and anything less than that over the next couple of months will be a major disappointment in the market. >> we'll worry about that another day, i guess, art, talk to you later. speaking of the markets, just off the session highs, close to 2% gains on the nasdaq at this hour. much more live from post 9 straight ahead. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something.

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get happy. get geico. fifteen minutes could save you fifteen percent or more. that july jobs number showing a gain of 163,000, did you win our nail the numbers sweepstakes? our staff is back at hq combing through the responses, i think we have determined a winner. simon is signing the prize right now. this is an nbc olympics backpack. autographed by all of us. >> a very large backpack, you could fit the flying squirrel in here. gabby would fit in there. >> and we brought presents back from london for everyone. but simon, i had to bring, give this to simon. i had to bring this back to you. just because i know your love of team gb.

now in fourth place, by the way on the medal count. >> and we're a very small country, sorry, it is a very small country. >> what is this "we"? >> apparently i'm still british. you know i would fail the cricket test. i'm cheering lochte, i fail the cricket test. >> you're going to stick around, we'll see you monday morning. >> good to have you back by the way. meanwhile if you're just joining us this morning, here's what you might have missed earlier on today. welcome to hour three of "squawk on the street." here's what's happening so far -- >> they will get the cap, it's a great business model. so people are stepping away until they get some capital. which i think they'll have by this weekend. july nonfarm payrolls increased by 163,000 jobs. the unemployment rate, 8.3%. let's be clear, the economy is growing, barely. we're not really adding jobs of any meaningful pace, confidence is still at recessionary levels. if things in any given month or quarter are slightly better or

worse, i expect it doesn't change the larger story, which is that this stinks. we still think second-half gdp is better, the economy is mending. the recession respite we heard a few weeks ago, carl, should be taken off the table. at the very margin it makes it less likely that the fed does anything next month, which would be good. >> the opening bell at a the big board. >> breaking news, knight telling brokers that the firm had obtained a line of credit. we've got a ways to go. i feel good about this number. but we need to do better and we're not going to stop. we're going to work every single day until everyone who wants a job, finds a job. they have some easing, i think they'll continue to ease, i think it's going to be a step-by-step process, rather than a very proactive process. and i think that's you know, that continues to be the story. good friday morning, live here at post 9 at the new york

stock exchange, we want to check the markets. a big day of course for the markets and for the job market at large. the dow, the nasdaq, the s&p, wiping out one of the worst weeks in a couple months in a single day. this is the biggest gain for the dow since june 29th, interesting action going on. retail stocks surging after the jobs number, from department stores to teen retailers, macy's walmart, zumiez. kohl's, zipcar reporting weaker-than-expected second quarter results, stock downgraded by six different firms since the company reported. we're in rally mode, we'll get the word on the street to see how you should set up for the weekend ahead. and olympic swimming sensation ryan lochte is with us from london to tell us about his five medals competing against michael phelps and more. plus, republican reaction to the jobs number with the vice chairman of the joint economic committee. congressman kevin brady will join us live.

and we'll reveal the winner of our nail the numbers sweepstakes, we've identified the winner. i don't know how close he or she got. but we'll find out if it's you, all of that and more coming up in the next hour. first to the big market raly, the dow surging well over 200 points on this better-than-expected jobs report. steve masoka is managing director of webb bush securities, good to see you again. >> good to be here. heck of a reversal after four straight down days. is this jobs talking? or is this somehow the market once again front-running policy coming either out of the fed or out of the ecb? >> i think it's all about europe. but i think it's europe talking. and i think the news this morning that members of merkel's coalition in germany will go along with draghi's moves to support the peripheral country debt was really the news that got things going. you'll notice the spanish and italian bonds have rallied dramatically this morning. the unemployment numbers were

good, no question about it. i don't think they were a super big surprise. i certainly don't think they're harkening a huge turn-around in the economy. the ism numbers -- [ inaudible ] [ inaudible ] >> well, i think we've lost steve's microphone. but his point is well taken. given that futures were up sharply. even before the jobs number earlier on this morning, spanish two-year came down, many, many basis points. so a lot of this was baked in. although i would argue the jobs number did add to some of the positive sentiment later on this morning. what are we going to do next here, joe anna? steve, i think we got your sound back. lost your mic for a second. your point was that this is all pivoting around europe, right? >> correct. i think if you look at a the market rallying last week and declining and rallying again today, it fits like a shoe. a foot in a shoe here in terms of what's going on in europe. draghi coming out and saying the ecb was going to get far more

aggressive, the market took off like a rocket and we had all kinds of nay-sayers being in mostly in the northern european countries, various leading politicians coming out and sort of assailing draghi for making these comments, talking about this was not the ecb's role to do. the market then goes back down. we had terrible beginning of the week. and this morning, you've got sort of important members of merkel's coalition coming out now, supporting draghi and supporting the moves draghi is about to make. you've got big rallies in italian and spanish debt. i really think that is sort of the main impetus of why our markets are up so much this morning. >> how much of it is deserved and how long-lasting is this? we've been looking at some three-month charts, you can see higher highs, higher lows, not a a dramatic channel, but a channel nonetheless. is that sustainable? >> well see, for the longest time on this program and others i've been saying i think we need a durable solution to the european debt crisis. i don't know that this is really it. and i think i've got a lot of

concerns that we still have a lot of, you know, a lot to do, a lot of wood to chop in europe before that problem is solved and that's going to continue to act as a pall over our markets. you've got an intractable european debt problem that doesn't seem to want to come to an end. but on the other hand you've got american corporations doing exceedingly well. american profitability by and large has been very, very good. we had another quarterly earnings season that quite frankly was good. and the bottom line was better than people had expected. so american corporations continue to be very profitable. i think there's value in the stock market relative to corporate fundamentals. and so if the european problem were to get cleared up, i think we would have a considerable raly. but that's a very troubling thing. i don't know that that's going do get cleared up so easily. >> steve, thank you very much for that steve musaka at webb bush. meanwhile, procter & gamble higher-than-expected quarterly profit despite a drop in sales.

the products maker announcing it will repurchase $4 billion worth of shares this fiscal year. joining us, the senior analyst with jpmorgan has an overweight on p&g. john, good morning to you. >> good morning. >> i guess the first question guidance to the third quarter, surprise to you on the down side? >> definitely a little surprise, we were already below consensus, we were expecting a little more investment. maybe a little less raw material benefit in the first quarter relative to the balance of the year. but they took it down a lot farther than we thought. it's interesting we've seen a couple of companies do this already this earnings season, coke being one, clorox being another. and the markets tended to look past it even with some pretty sizeable negative revisions. so a little disappointing, but not a surprise that the market sort of blowing it off here. >> yeah, so is the worry organic growth or -- fx headwinds or both which comes first? >> organic growth is the key for all of these companies, the bigger worry is if you take a step back with procter & gamble, why you've seen pershing square

move in there. it's a little more strategic. do they have the right focus on the right regions in the right categories? do they understand what it takes to win and what it takes to actually get that organic revenue growth? so i think what people are looking for from senior management now is a better plan that really revolves around not just going out and trying to win market share, but getting cost savings out there, that will sort of create this virtuous cycle of increased investment. which will then drive organic revenue growth so it's more complicated than saying just getting the top line moving. >> we'll keep this brief. but is the street rooting for any activist in this name? or do they want to see this fixed from within? >> you know, i think it's really a combination of both. i think what people are looking at here is that procter & gamble has historically been a a very sort of insular company, you know, based in cincinnati, they only hire from within. and i think people are saying that management has to change how they're approachinged

company. and if ackman gets them to move factor, gets them to move more aggressively, which it sounded like on today's conference call, then everybody is going to win from that standpoint. >> we'll see what happens on that story. john, thanks so much for the time, good to talk to you. john forshay at jpmorgan. gary kaminsky joins us on set. >> great to see you stateside. >> thoughts to the on a heck of a day to come back, i'll tell you. >> when i look at the tape today, i think it's confirmation of a thesis i had started to hear wednesday morning. i don't know if caught our conversation on the euro close. on wednesday about the idea that although there had been a huge amount of expectation into the ecb meeting on thursday, given the type of holiday/vacation periods that go on in many of the european countries in the month of august, that although there was a lot of expectation, in fact there really wasn't and therefore, when i looked at what happened yesterday and i look at what's reading the tape today, confirmation that the thesis did pan out quite nicely for those that believed in it.

>> so people overplayed the worry or disappointment? >> go back a week ago, to the statement, the expectation, we will do anything to save the euro. there was a lot of anticipation building into that into the early part of the week. a number of credit traders pointed out middle of this week, while on paper it looks like the expectations were very significant and huge in fact they really weren't because in fact anyone who does business in europe knows nothing happens in europe in the month of august. so now we push it to september. maybe in september the expectations are a little bit more important. >> thoughts on knight? are we now talking about doing business through the course of today? or is this reported line of credit here about survival into next week? >> well i do think that knight will get some sort of financial infusion. but it brings up a number of things. number one in terms of the people here, i say this with the sensitivity and understanding that there's human capital here involved. but i will say this, this is a good thing. i heard a lot of people say yesterday, this is going to hurt investor confidence. this is bat for retail.

i completely disagree. this is how the system is supposed to work. when you take big bets, when you run programs, when you do things, you put your capital at risk. we've talked a lot about the old wall street culture where partners' capital was at risk. it's not a good thing for knight capital. you should not have bailouts, you should not have people saving the system. if you make a mistake, you should pay the price. >> the mistake was what? >> rolling the software out too quickly? >> exactly. i've been chatting with a number of let's say former wall street executives over the last several weeks and i do want to bring up a screen which talks about what maybe are some of the bigger issues that this, what happened this week with knight bring it is up. if you could take a look. it brings up these issues about dark pools serve no purpose. the whole idea about algorithms, if they aren't just prearrange trading by collusion and the whole idea of naked short-selling. why do i bring these up? these are great questions, i

don't have the answers but i want to tease it by saying we'll have a special guest join us on wednesday of next week. bruce karpati, the head of the enforcement at the s.e.c. for the asset management division. this is something i'm quite excited for. we'll talk about what happened with knight, as well as some of those other issues, a lot of questions and we're going to get those answers. >> don't go too far. meanwhile we hop over to the cme and check in with rick sandali, talking a little fed. >> you're current. we had some smart economists on today talking about tool boxes and the fed and keeping their powder dry. i was lucky. because somebody left the fed's tool box right here for me. and so we're going to see what's inside of it. oh wow, we have mario draghi's bazooka from this week, that worked out pretty well and you know, i don't know what this is -- chapter 1 of dodd-frank that affects the fed in a big way. the powder that the fed is keeping dry? i have that powder.

and it is dry. the problem is -- is it's basically koolaid, that's the powder that we're keeping dry right there. let's talk about the fed's abilities, what are the fed's abilities that we really should worry about? i'll tell what you we should worry b. we should worry about the viability of what they're doing. i think that's key. but let's talk about the sustainability, okay? because the sustainability is really, and forget my spelling, you try to do this, live, that's almost the most important thing. we've seen a lot of stimulus, where comes and goes, but it doesn't last really long. and of course, that really brings me to the key -- and that's durability. what's the durability of what the fed is doing? you know, when you throw the mix and the coolade, it stays this color. but when you throw the koolaid into the system as we see when gdp goes up and it goes do 1.5, it doesn't last. we see the federal government sprinkles some sugar into the

system and it goes to states and cities and localities. but ultimately, think san bernardino, they can't afford it. so the jobs numbers goes down and that becomes a bullet for the current administration? no, they need to balance their budgets, they need to have the main factor here that everybody seems to forget. and that's affordability. and think about it if you're a saver. if they do more kwaequantitativ easing, what's their affordability? they'll end up being helped by the government and it's going to come around and bite us on the backside. back to you. >> rick, thanks so much, rick santelli in chicago. let's send it over to jackie de angelis at hq with a market flash. >> watching shares of globis medical, a medical device maker popping on its first day much trading. the opening print was 9. 1% higher than the $12 ipo price.

still sold about 8.3 million shares, raising $100 million. shares are up 18.75%. carl? >> when we come back, is an 11-time olympic medalist, five of those won in london just this week, ryan lochte will join us, tell us about his experience at the olympics and what he has planned for the future. those olympians can take home gold, silver and bronze medals. but how about you? what do you get? absolutely nothing. if you nailed the number on july's employment report, guess what? you'll be taking home this official nbc olympic backpack. signed by the "squawk on the street" gang. are you this week's lucky winner? find out later on "squawk on the street." is now within your grasp with the e-trade 360 investing dashboard. e-trade 360 is the world's first investing homepage

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. welcome back, dow hanging on to good levels here. up 231, back above 13,000. the best day since late june. all of these indices were negative for the week and they have undone one of the worst weeks in a couple of months in a single day. largely because of some news out of europe and of course the jobs number today in the u.s. helping. meantime, he's one of the stars of the london olympics and ryan lockdy has five medals to prove it lochte sat down with our own michelle caruso-cabrera earlier today and michelle is here with the highlights, michelle, good morning. >> good morning, carl. yes we traveled to the olympics,

cnbc, to cover the business angles of the games, of which there are many, but occasionally we like to indulge and sit down with some of the extraordinary athletes. ryan lochte is one of them. spoke with him this morning and started with a very basic question -- what's it like to be wearing a gold medal? >> knowing that i'm the fastest person in the world in the event that i just did -- is pretty amazing. a gold medal a the olympics, not many people, only a handful of people can say that in the world. it's pretty amazing, knowing that i represented my country well. >> the last summer olympics was all about michael phelps. this time, you seem to have emerged as the other big american star. are you happy about that? do you feel like you have really emerged on your own? >> i think so after the 2008, i mean i got two golds and two bronze, but i wasn't satisfied. i wanted more. so i knew i had to put in harder

work in the pool and out of the pool. i mean i've gotten faster ever since. >> oh yeah. you are coming back in four years, you've done so well. it seems to me that this would be a point where you get even more sponsorships. are you hearing from more companies? and this is cnbc, it's okay to say yes we revel in the fact that you will have financial success, along with swimming success. >> you know what, right now i'm in a good position financially. yeah, i mean i'm doing the sport for another four years, i'm going to rio, 2016. so hopefully there will be more sponsors. >> at the next olympics, you'll be 32. what after that? >> who knows? i could go for another four years. it depends on how i'm doing. on what career i decide to go. whether i go into what i really want to do after swimming, is all said and done, fashion on designing my own clothing line.

>> wow, do you design clothes now? >> yes. >> like what? >> i've designed shoes. >> cool. >> for women and men. shorts, shirts, hats. you name it. >> ryan lockdy has another business venture starting right now, carl. he's putting out a video exercise dvd. it's call eed "lochte hard core" it's a reference to the body, working the core. but i think the pun is intended. >> a lot of athletes, michelle, sampras, agassi,ed ay roddick spend their entire careers facing a rival they can never truly best. with phelps out of the picture, he has, 2016 could be much, much different for him, as good as this olympics was. >> absolutely. you can tell he's looking forward to that he said to me, yes, i'm back in four years, i

may go another four years. here's the one thing, carl. already analysts are looking at this and they're skeptical that phelps really sticks by his word and doesn't come back. they think there's a possibility. you know how enticing it is to try it again. more sponsorship money, more glory, we'll see if it's just a lochte rio or if phelps is there as well. >> finally a friend of mine tweeted that she counted three or four lochte forearm touches by michelle. i assume that was no accident? >> it was his birthday. >> okay. there you go. michelle, nicely done. we'll talk to you a little bit later, covering the olympics for us in london. the dow is up 226, s&p at 13091. above some key levels we've wrestled with all summer long. when we come back we'll talk about that and the nightmare at knight capital. live at the company's headquarters with mary thompson and the mood on the ground.

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cnbc report erts to get a life. others expressed confidence the firm would find some way to survive. it looks like it will survive for at least another day. "the wall street journal" reporting kth has obtained a line of credit to bring it through day's end and telling clients to resume routing trade through its platform. but some are staying away. fidest which declined comments to cnbc, say it's staying away as well, barclays analyst questioning how long the firm can survive if clients do stay away. he does say the firm's cash, its credit lines and liquid securities can plug the $440 million hole caused by those bad trades executed on wednesday. trades caused by a software glitch. but freeman, whose firm has received noninvestment banking revenue from knight, said if concerns about reliability persist, it of course raises questions about knight's survivability. to that end, ceo tom joyce, hiring sandler o'neill to help

the 17-year-old firm find an investor or acquirer. this less than two months after joyce staunchly defended the technology that could prove to be knight's undoing. >> the facts show that investors have benefitted greatly over the years as a direct result of the developments in market technologies. high-speed computers, dark pools, et cetera, are not the problem, indeed they are the culmination of our free market system, competition. >> now, knight has declined comment to cnbc or hasn't returned or emails, questions remain, who might buy the company, some say its trading platform would be of interest to some of the big banks and cnbc reports that citadel, without seek an adviser to take a look at a knight deal, carl, back to you. >> gary, a quick question, and i have seen a lot of these situations over the last several decades, do the employees feel that management at least is doing the right thing? going into this week and are they behind current management? >> you know, there was a lot, a number of people that we spoke

to as i said, they expressed confidence the firm would survive and that's a reflection of how they feel about management. i talked to to some other people who said that tom joyce's, they call him a stand-up guy and they feel that if anyone can get the deal done, it would be him. back to you. >> mary, thanks so much, mary thompson. european close is coming up. +g#a#a#a#a#a'9#a+=#a#a#a#a#a#a#a

we go to the close in europe

for the end of the week and it's a very powerful rally. check out the numbers in detail. a reassessment of what mario draghi actually said yesterday. what it means for intervention and for coordination further down the line. and also, simply because of the move that you have seen at the short end of the bond markets, we'll come back to that in a molt. but obviously the news that you had here with the employment report, hasn't actually hurt the gains that we've had during the course of the session. we have moved higher. that's italy up 6% today. spain up 6%, but even the top 50 blue chips around europe are 4.5%. that's because a lot of those 50 blue chips are still banks. and let's have a look at what's happened at the short end of the curve. and you'll see what i mean. yesterday mario draghi hinted that a week last thursday, he said he would do all he could for the eurozone or all ha was necessary for the eurozone in part because of the spiking that we'd had in yields on the short

end. you can see the effect of what's gone on over the last week. with the news conference, the spanish short end well above 7%, down to 5%. that's significant for banks. the steepening of the curve makes them more profitable and increases the value of the short-term bonds they're holding and which they bought so strongly on the ltros. it's not just spain, it's also italy. a big move down as you can see there at short end. important again for the solvency of the banks, the profitability of the banks. and still predicated on the basis of course that there will be more action further down the line from the ecb. so here you're falling if close enough to 6% down to 3.9 in italy. let's have a look at the italian banks and how they've jumped. a feeling that yesterday's selloff was perhaps overdone. 11%, 11%, 9, 9, the big insurer over in france, importantly you know their exposure to sovereign debt around europe, the moves

that we've seen today have put some of the banks in france now just, just into positive territory for the year overall. and have a look at some of the other eurozone financials, deutsche bank, and kcb in belgium, in order for draghi to get whey wants, he does still need the italians and the spanish to come forward and say that they want now access to the essf. they will take bailout and conditionality the spanish prime minister was speaking again. he's got lot on his plate with the independent areas of spain and whether or not he can rein them in. he didn't mention that he was going to go to the efsf, talking to people in madrid, they're not sure he's the man. he's taked his reputation on no more conditionality. will he follow through politically? probably yes because he doesn't really have a choice. i want to say one more thing,

yesterday when i stood here i was so worried that people were so negative, so much commentary had been negative on what draghi had said. i felt people didn't understand it i spent part of yesterday afternoon explaining what's going on at the news conference. go to cnbc and put my name in, hobbs, it gives you an indication of what went on during the hour's news conference yesterday and perhaps it will help you to better understand why we have rallied today, when yesterday of course it all appeared gloom and doom and there was so much negativity. carl, have a great weekend, i'm off next week. >> what, again? >> you know how it is. >> your point of view not that far off from gary's, in terms of how the market read disappointment and how some investors read disappointment. >> he did lay out a plan and the newspapers today have more accurately portrayed what is going on. but this move at the short end is everything. >> yes. >> for many people. that steepening of the curve very often triggers simply that.

and that will trigger a market rally and you've seen that today. >> have a great week off, watch some track and field. go team gb. we'll see you in a week. meanwhile, gary kaminsky, you're looking at knight, the eyes through the prism of investors in etfs, right? >> a couple of further comments on knight. reported earlier, sam o'neill was hired, i know the team at sandler o'neill, i would be surprised if they didn't find a way to find some additional capital for the firm over the weekend. one of the reasons why, it was pointed out yesterday by one of the producers back at hq, knight is major player in the etf space, they make the market in many of the major etfs, we talked about it, this is the fastest growing aspect of capital markets in business. etfs, get such a huge flow, it's an important asset there. making a bit of a right turnabout etfs, want to point out something else. the most interesting think i read all week came out of a morning note of convergence, they talked about the growth of

etfs, and the track record on etfs. they pointed out if you look at performance, of the top 30 etfs, the top three in terms of performance, think we have that screen, those being the etfs, drn, ure and tecl, you look at the performance, you look at the bottom three performance of the top 30, that would be the drv, the zsl and the vxx. we'll bring in the flows. point is that here that retail, there's always this idea that retail chases performance and mutual funds, with the etfs, it's been the opposite. i find this fascinating. the biggest three in terms of performance had very small inflows, over the last period. compared to the bottom three in terms of performance, those bottom three, drv, zsl and the other, the outflow, very interesting, i don't know what to read about it but something this i'm going to think about over the weekend. why was it that a mutual funds,

retail chasing performance, but in the etfs, they have not. >> why would investors chase someone who was underperforming? >> i don't know, i don't know. right us if you have any thoughts of -- >> that's what stood out to me in terms of numbers and the flows. the market-making aspect of knight in the etf business is a very valuable aspect. i think sandler o'neill will find something there over the weekend. >> it will be a good weekend to watch. meantime, bob pasani is on set watching the rally. >> i assume you may know the answer to the problem. >> i'm going to speculate on that in a minute. what happened? wiped out all the losses for the week on what? in the last 24 hours? it's very interesting. i commend simon because by and large i agree with him. look we were down, almost 2% on 0 the week. on the s&p 500. four down days in a row. not a lot of catalysts and all of a sudden the markets just turned around. so the s&p 500 is now essentially flat to slightly positive on the week. there's my capital. let's go back and bring up the

s&p, this is for the week, all of a sudden now we're back to where we were. practically last friday. just a couple of quick comments on what's going on. the market rally began over in europe. it did not begin on the nonfarm payrolls report. i commend simon because i think he's right. the idea here is that the tone was more dovish. there's been a kind of re-evaluation, if it doesn't make you crazy, folks, it makes me crazy. there's a re-evaluation of doralidora draghi's plans. that if you sign a memorandum of understanding here we're going to lay out a way of how to help you out. it's a more coherent plan than what he's presented before. nonfarm payrolls it reverses a string of disappointments. three months of disappointment on the nonfarm payrolls. not enough to necessarily change the overall economic opinion, but still better than the string of disappointing numbers we've had recently. so that's the bottom line on that let me move to knight trading. there's a a problem with watching knight stock right now. we've got, put up knight. knight has moved we have moved

50% in a day. knight was $2 yesterday. suddenly it's $3.40. what's the news here? i keep looking around here, well they've obtained a line of credit for one day? so somebody can open their books and take look at them? that's the kind of crazy way to try to figure out what the company is going to be doing overall here. most major customers we understand continue to avoid night. it's traded 100% of the float. 150% yesterday. five companies owned 40% of night. forget it. this doesn't -- these guys, we don't know what their positions are any more. but i can assure you it's probably half of what this was. it means there's a lot of fast money people involved in the stock that don't necessarily know anything about what is actually going on. that's why i commend you, look at the credit markets now. these are the guys who matter. they have one convertible, 3.5% bond, due march 2015. a week ago at 94, it was as low as 67. right now trading around 78 cents. what this tells you, guys, is

that they're uncertain about the value of the company, but it is still to your point, very, very valuable. >> bob, that's an amazing point because that's what you have to focus on. the equity is a question mark. what the capital infusion, what the people who put the new capital in will want. how much will they take away from the existing equity holders and that's a great point. >> what these guys are trying to figure out will they get paid off in the event that the company has to be broken up. and so far the street is saying they're going to get paid back a substantial amount if that in fact happens. >> i wish we had that on our ticker, not just the stock symbol. >> you watch the credit markets in this kind of situation, not the equity markets. >> i should point outen the list of shareholders that bob showed, remember three of those top five were index funds. so whether it be blackrock, dimensional or vanguard, they're going to hold those shares, because they're index funds and they won't sell them unless the stock comes out of the index. getting over to rick in chicago for some of his reaction on everything we've seen today

from the data to what's going on in europe, rick? >> well you know, i think the data -- it's hard for me to get excited about it. but it's also you know, better than i was looking for on jobs, even on ism, nonmanufacturing, i think this week, the big numbers in my mind are back-to-back negatives on manufacturing. not because it's the biggest part of the economy, but because it always seems to be the canary in the coal mine. it seems to give us a good indication what comes ahead. i remember when the koolaid was flowing big on the earlier programs, manufacturing really started pop early and it gave you a clue that gdp pop, they just weren't sustained. i take exception with an interpretation, simon is absolutely right, ira harris and i have talked about it, ten-year minus two-year spread in spain, look at it, let's put it up there, crew. if you look at it, you'll see at his come out like a bat out of hades in terms of the upside. flattening, central bankers don't like. steepening, they're in love with. so what does that mean, everything is working?

that isn't my assumption. come on, everybody, look at what really moved. if you look at the two-year, it closed last week around 4%. right now, it's around what, 5.30 last week, 4% this week. here's the key, look at the ten-year, it's basically unchanged, 6.85 last week, 6.75 today. the point is, most average investors they can't trade spanish instruments on the fixed-income market. it's left to the big boys, the hedgies, they had huge position short along the curve. when it flattened because the short maturities are going to be associated with some of the gravitas about the buying programs, they're, be careful how you look at the curve. it's not a verging curve any more, it's been attacked and it's going to behave differently. back to you. >> great point on investor access to some of these instruments, rick, thanks so much. meanwhile, after tons and

tons of tweeted entries to our nail the numbers sweepstakes, we have a winner, this viewer tweeted one guess throughout the sweepstakes, nailing the number on wednesday with exactly 163,000. joining us on the cnbc newsline is this month's winner, jim butler. jim, good to talk to you this morning. congratulations. >> thank you, thank you. >> we can't talk a lot about what you do, just because of your company compliance rules. safe to say you're in consulting. you have an economics degree. you're a boulder grad like myself and kernen, which we love. >> but what drew you to 163? >> well, last week or early this week's adp numbers seemed very low. so just based on that and the accounting of it, i thought you know, let's go ahead and take last month's numbers, double them up, add a three and i guess shooting off the hip, found out where we are. also i guess with ben bernanke coming out and saying he's doing nothing until, as long as we

have no longer worse jobs, then i kind of just supposed he knew something that the rest of us didn't. so went a little optimistic. >> your point about it being sort of the crap shoot is exactly right. but still you say also that you're sort of an eternal optimist and i think you said you wanted to see this number higher than last month's right? >> absolutely. >> do you have a big macro view of what the second half is going to look like? because there's still a lot of debate about that. >> and in respect to the second half of the year, largely to be told. it's i think it's a little bit left up to the fed and also, we're going to be leaning on large companies in america, i hope to see we have good earnings, if we have good earnings, i think we could trend very similar to like we did the first quarter of the year. so to be told. let's just see what they have to say next time the fed meets in jackson hole. >> that could be a key meeting. meantime, here's your prize of

course, is this london, nbc london backpack just signed by gary and jim and melissa and simon and david and myself. so congratulations. >> thank you, thank you guys so much. >> jim butler, the winner of our nail the number contest. >> this is a good give-away. >> this gorgeous backpack. straight ahead, the first response to today's jobs numbers from the other side of the aisle. congressman kevin brady, vice chairman of the joint economic committee. born with.e ou'r and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something. make it matter.

top of the hour, knight capital and what it means for investors. we'll talk to wall street legend, michael le branch. think facebook is a bargain now? don't click the buy button until you hear what one of our guests think how much lower it's going. and our guest meantime the u.s. economy adding 136,000 jobs in july. while the unemployment rate did inch up slightly to 8.3%. joining us with the republican reaction to the number is joint economic committee's vice chairman, kevin brady joins us from houston. good to talk to you again, good morning. >> thanks, carl, welcome back from london. >> good to be back. and good to see i guess numbers like this. although the debate at this table at least sort of centers

around its better than the alternative. but certainly not good enough. what's the republican take? [ inaudible ] [ inaudible ] >> second time today we've lost a guest's mic, we'll try to sort out the audio issues. the dow up 239. the cnbc real-time exchange market snapshot is sponsored by interactive brokers. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know.

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want to get back to congressman kevin brady out of houston. had some audioi issues before te

break. congressman i think i asked you where the republicans stood in debate over this number and you were about to say? >> look, every month we have jobs is good. and these numbers beat some pretty low expectations, we're slightly above treading water. there's two concerns we have. one is that we hope this is not the new normal. that because the jobs numbers aren't horrible, that they must be good. truth is, we ought to be pumping along at about twice these jobs numbers, especially this deep into the recovery. this is recovery continues to be dead last since world war ii. and the other concern, i think is that businesses continue not to hire along main street at the level we need it to be. in a major way. and so we still think we've got to get this washington out of the way of the recovery. we think there's potentially double this amount or triple this amount of job creation in the economy. but we've got to do much better as a nation than we are right

now. >> we had the labor secretary on earlier this morning. obviously she's quick to point to congress as a body that can help the jobs picture in their own way. do you believe any of the reports about would-be compromise over the fiscal cliff are for real? >> you know, i sure hope so. this is no way to run a railroad. i think if we can take this obsessive talk about higher taxes, by the president off the table, i think we call a time-out on all the just the wave of red tape coming out of washington, and then of course make sure that not only have we stopped the tax hikes, but we've got to deal with this health care issue, businesses are not hiring because the president's new law and it's going to be with us. i think its going to be a drag on the economy for quite some time. so i'm hopeful that we can work this out before the problem occurs. >> finally, you've been a critic of the fed for a while, congressman. and of course, a lot of the market action, the s&p is at the

highest level since may, is arguably about anticipating further balance sheet expansion from the fed. is there room for them to do anything right now, to foster more employment? >> no, not that is effective. i think absent a collapse of the eurozone, absent a fiscal cliff, they've really done all that they can do. in fact too much on employment. i think extending the zero interest rate policy for another year does nothing. i think banks, if you lower the interest rate on excess reserves, banks still will not lend more because businesses aren't purchasing more. and then finally i think trying to lower the rates lower, long-term, because the fed bond purchases, that's not the problem. i really think absent a crisis from europe, the fed needs to step back and i think leadership at the white house, congress needs to step forward. >> congressman, always good to talk to you, apologize for the problems earlier on. i'm sure we'll talk to you in the near future. >> thank you, carl.

>> kevin brady of texas in houston. meanwhile, mitt romney is expected to react to the jobs number at any moment. we want to bring in our own john harwood to talk about the political ramifications in the way the numbers are trending. >> any upside surprise is good for the president. they had been really hammered by the last couple of jobs reports. and this is better news. but it's not good. we've got an unemployment rate that is 8.3%, that's not helpful, it's just better than the alternative for the president. and i think we've got mitt romney about to speak right now. >> we are going to go to the governor as soon as he starts talking about jobs, a lot of these appearances front-loaded with a lot of thank yous and acknowledgement of those in attendance. when he gets to the jobs portion we'll take it full. what is the best line with 8% plus for 42 months? >> you can expect mitt romney to focus on the fact that unemployment is up to 8.3%,

that's not pleasing for anybody. and point that this is an anemic recovery, which it is. what president obama is going to say, is that we're on the right track, we've had a long period of positive job growth. economic growth. and he's going to hit the congress for not passing his jobs plan and talk about the contrast between his approach to taxes and mitt romney's which polls show the american people like what obama is saying better. although they haven't been able to achieve success in the congress with that. >> the fiscal cliff, we just asked kevin brady about whether or not this is going to end in pain this year or not. what's your best read on that? >> my instinct is that serious people in the congress, both in the republican leadership, democratic leadership and the white house, do not intend to have this sequester take effect. do not intend to have all of the bush tax cuts expire. so i think there is going to be an opening for a compromise and i suspect they will.

but it's going to be difficult, may not happen until the first quarter of next year and i think mitt romney is about to start talking about the economy, let's go to him. >> let's go to the governor in las vegas. >> there are, i mean you know, you know this, these numbers are not just statistics. these are real people. really suffering, having hard times, 23 million americans out of work. or stopped looking for work, or way underemployed. 23 million. the official unemployment number, 8.3%. that's the longest period of time, 42 months, the longest period of time we've had unemployment above 8% in american history. since this has been recorded. this is an extraordinary record of failure. the president's policies have not worked because he thinks government makes america work. he's wrong, it's people like john that make america work. [ cheers and applause ]

>> i hope the president understands, but mccandles trucking, international trucking, all the business that the mccandles family organized, they were not built by government, they were built by the mccandles family and the people who work for that family. they were built by people, not by government. and so the time has come for a plan that will actually get america's workers back to work. that will create more jobs and more take-home pay. and i know how to do that. this is not a mystery for me. this is not -- this is not theory. this is practice. and i've got five things i'm going to do, five things i'm going to do, in my plan to help get the middle class working again with more jobs and more take-home pa